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A $5trn addiction problem
In this episode of the New Money Review podcast, Michael Howell, CEO of CrossBorder Capital, a London-based advisory and fund management firm, explains why wholesale money markets are now addicted to the liquidity pumped into the system by central banks. There is little prospect of central banks reversing course, says Howell, and we should look forward to further bouts of quantitative easing (QE) around the globe. And, far from its previous promises to unwind the QE it embarked on after the 2008 crisis, the Fed has just overseen the biggest liquidity surge ever, CrossBorder Capital calculates. In the podcast: Why banks are no longer the primary creators of money The critical role of the repo market Who the main lenders are in the financial system Why central banks need to backstop the system The main risks in the current system Which assets to watch out for as a sign that the liquidity boom may end
Rewiring the monetary system
The global financial infrastructure—a complex network of technical systems provided by central banks, exchanges, clearing houses and securities depositaries—supports trillions of dollars of trading a year and underlies almost all economic activity. But it could work faster, more cheaply and more safely, benefiting everyone. In India, a shift from paper-based to digital finance now promises a $700bn boost in economic output. Who is going to write the electrical circuit map for the new system? Some powerful names are already making a land grab. Mark Zuckerberg told us in 2019 he wants his own version of money to go with his social media networks. Cryptocurrencies, launched in the depths of the 2008/09 financial crisis, offer a more radical alternative. Facebook’s Libra may not come to fruition. But the current financial system is looking, if not obsolete, then increasingly outdated. There isn’t a single part of today’s infrastructure that will remain unaffected by technological change. And there are certainly going to be big winners and big losers by the time we reach 2030. But many of the new infrastructure initiatives are being introduced from the ground up, making it difficult to keep track of what’s going on. It’s also hard to assess what’s serious and what’s not. Ruth Wandhöfer, our guest on the latest New Money Review podcast, ‘the future of money in 30 minutes’, is well-positioned to see where things might be heading. A former banker, Ruth now consults a variety of clients as an expert on financial technology, infrastructure and regulation. Here are some of the topics she discusses with New Money Review editor Paul Amery during the podcast: · The emergence of new financial infrastructures · The path to speedier financial settlement · The role of blockchain in infrastructure reform · How to ensure a level playing field for different fintech players · The importance of digital identity · Open-source versus proprietary technology standards · How to survive and prosper in the new digital finance economy
Facebook's money moonshot
Facebook’s Libra project, announced this summer, shook up politicians and regulators by showing how quickly the digital money race is accelerating. To understand what's going on, we need to look at a few key areas of competition, says Huw van Steenis, a banker at UBS and one of the world's leading finance analysts. “Libra has brought four issues together,” he says. “First, there’s the tokenisation of money, and how this can be used to reduce friction in the system." "Second, there’s the question of whether payment should be done on bank infrastructure rails, credit card rails or a completely new set of rails, as in China." "Third, who should control digital wallets? Should it be big tech companies, telcos or banks?" "Finally, who gets to control the data and the ecosystem that goes around it?” Listen to our interview with van Steenis in the latest episode of our podcast.
Moneyland
There’s a secret country out there that’s invisible to most of us. It’s called Moneyland. This country doesn’t discriminate against outsiders. It’s open to anyone, so long as they can afford the entrance fee. It’s very big and very important – the country may contain an eighth of all the wealth in the world. It’s a virtual place. You can’t find it on the map. But it’s also a very real, physical place. The person right next to you, right now, might be living in Moneyland. The house next door might be in Moneyland, even though it has a street name and number just like yours. Moneyland is where the world’s super-rich, its most powerful businessmen, its best-connected politicians and its cleverest criminals all hang out. How can we begin to understand this place, which we can’t really see or measure? Oliver Bullough, an award-winning writer and my guest on this New Money Review podcast, can help us answer that question.
Could governments split bitcoin?
In June, the Financial Action Task Force (FATF), a group of 36 governments seeking to address money laundering, said it wants to tighten its rules on the transfer of virtual assets like bitcoin. New FATF guidelines place an obligation on cryptocurrency exchanges—where the general public can convert cryptocurrencies to traditional money, and vice versa—to obtain, hold, and transmit information about their users. The new rules will apply to anyone sending or receiving virtual assets like bitcoin to or from an exchange. If followed to their logical conclusion, the guidelines could split bitcoin and other cryptocurrencies into two, say participants on the podcast. But will governments succeed? Listen to this podcast to find out. Paul Amery of New Money Review interviews David Carlisle, head of community at Elliptic, and Obi Nwosu, chief executive at Coinfloor.
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